El Niño is here: What organizations and risk professionals need to know

El Niño has arrived and climate scientists are predicting that it could intensify and remain a significant weather risk factor throughout 2023 and into 2024. This means that organizations and their risk professionals should be prepared for and be ready to respond to potential El Niño-driven weather challenges, such as extreme storms, extended periods of drought, and unusual meteorological events that could affect their operations and risk management strategies.

What is El Niño?

El Niño is a natural climate phenomenon characterized by the unusual warming of surface waters in the eastern Pacific Ocean. It affects ocean temperatures and weather patterns from North America, to South America, to Australia. It occurs every two to seven years and is the “warm phase” of the El Niño-Southern Oscillation (ENSO), with La Niña being its "cool phase."

Under normal conditions, strong trade winds push warm surface water westward across the tropical Pacific, resulting in an upwelling of cold water along the coasts of South America. However, during El Niño events, these trade winds weaken, allowing warm surface waters to move eastward, which disrupts the upwelling. This can lead to significant impacts on coastal ecosystems and fisheries, with potentially devastating economic consequences.

The risks El Niño poses to communities and organizations

El Niño’s effects on the global climate are far-reaching, creating teleconnections — large-scale, long-lasting, interrelated climate anomalies — that influence weather patterns worldwide. Strong El Niño events can cause increased precipitation in some regions and droughts in others, affecting water supplies, agriculture and farmers, food processors, manufacturers, and retailers.

Such disruptions of global atmospheric circulation and water temperatures may lead to unusual winter weather in some regions and stronger tropical storms, hurricanes, and tornadoes in others.

These extreme conditions can increase the risk and intensity of wildfires, providing drier and more easily ignited grass and brush material, and sparks and flames that spread more rapidly, as recently seen in the tragic Maui wildfire. And this can further raise the risk of flooding, as charred soil acts as a barrier to water absorption.

Events exacerbated by El Niño can cause extensive property and infrastructure damage. Inaccessible roads, extended power and water outages, material and labor shortages, and other factors can lead to major supply chain, transportation, logistics, and supplier and customer business disruptions, further complicating the road to recovery. Additionally, El Niño-driven natural hazards such as flooding and drought could contribute to the spread of disease within affected communities.

Notable El Niño events occurred in 1982-83 and 1997-98, creating significant climatic changes across the globe and resulting in US$4.1 trillion and US$5.7 trillion in global income losses, respectively, according to climate researchers. 

As a risk management professional, it is crucial for you to understand the potential business disruption and other risks associated with the 2023-2024 El Niño phenomenon and implement strategies to mitigate them. While the impacts of this El Niño year remain uncertain, taking proactive steps now can help your organization remain resilient and more effectively withstand any weather-related challenges that may arise.